The study, conducted in universities of medical sciences, seeks to investigate the relationships among strategic compensation practices, psychological contract, and affective organizational commitment. In addition, the study aims to test the mediating effect of psychological contract in the relationship between strategic compensation practices and affective organizational commitment. The study sample comprised 301 non academic staff in the universities of medical sciences in Iran. Results reveal that strategic compensation practices led to perceived fulfillment of psychological contract and the latter, in turn, led to higher affective organizational commitment. In addition, employees with higher levels of affective organizational commitment who perceived a fulfillment of psychological contract were less likely to leave an organization. There was significant relationship between employees’ psychological contract and their affective organizational commitment. The study’s findings are generalizable to other universities of medical sciences and perhaps to similar universities in the Iran. Future research should examine the antecedents and consequences of affective organizational commitment in other universities in Iran. The study suggested that to avoid intention to leave and retain employees who identify with their values and goals, organizations ought to provide effective strategic compensation practices in decision-making. Implications of the findings of this study and possible directions for future research are also discussed.